Intrinsic value of Jean Coutu Group (PJC) Inc. (The) Class - PJC-A

Previous Close

$21.83

  Intrinsic Value

$14.67

stock screener

  Rating & Target

sell

-33%

  Value-price divergence*

0%

Previous close

$21.83

 
Intrinsic value

$14.67

 
Up/down potential

-33%

 
Rating

sell

 
Value-price divergence*

0%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of PJC-A stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 4.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.31
  4.30
  4.37
  4.43
  4.49
  4.54
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.89
  4.91
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
  4.96
  4.97
Revenue, $m
  2,978
  3,106
  3,242
  3,385
  3,537
  3,698
  3,868
  4,047
  4,236
  4,435
  4,644
  4,865
  5,098
  5,342
  5,600
  5,871
  6,156
  6,456
  6,771
  7,103
  7,451
  7,817
  8,202
  8,607
  9,032
  9,478
  9,947
  10,440
  10,958
  11,502
  12,073
Variable operating expenses, $m
 
  2,780
  2,901
  3,030
  3,165
  3,309
  3,461
  3,621
  3,789
  3,967
  4,155
  4,348
  4,556
  4,775
  5,005
  5,248
  5,502
  5,770
  6,052
  6,348
  6,660
  6,987
  7,331
  7,693
  8,073
  8,472
  8,891
  9,332
  9,794
  10,280
  10,791
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,707
  2,780
  2,901
  3,030
  3,165
  3,309
  3,461
  3,621
  3,789
  3,967
  4,155
  4,348
  4,556
  4,775
  5,005
  5,248
  5,502
  5,770
  6,052
  6,348
  6,660
  6,987
  7,331
  7,693
  8,073
  8,472
  8,891
  9,332
  9,794
  10,280
  10,791
Operating income, $m
  271
  326
  341
  356
  372
  389
  407
  426
  446
  467
  490
  517
  541
  567
  595
  624
  654
  686
  719
  754
  791
  830
  871
  914
  959
  1,007
  1,057
  1,109
  1,164
  1,222
  1,282
EBITDA, $m
  312
  371
  387
  404
  422
  441
  461
  483
  505
  529
  554
  580
  608
  637
  668
  700
  734
  770
  808
  847
  889
  933
  978
  1,027
  1,077
  1,131
  1,187
  1,245
  1,307
  1,372
  1,440
Interest expense (income), $m
  0
  0
  0
  1
  1
  2
  3
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  26
  27
  29
  31
Earnings before tax, $m
  273
  326
  340
  355
  371
  387
  405
  423
  442
  463
  484
  511
  534
  560
  586
  614
  643
  674
  706
  740
  776
  814
  853
  895
  939
  984
  1,033
  1,083
  1,136
  1,192
  1,251
Tax expense, $m
  73
  88
  92
  96
  100
  105
  109
  114
  119
  125
  131
  138
  144
  151
  158
  166
  174
  182
  191
  200
  210
  220
  230
  242
  253
  266
  279
  292
  307
  322
  338
Net income, $m
  200
  238
  248
  259
  271
  283
  295
  309
  323
  338
  354
  373
  390
  409
  428
  448
  470
  492
  516
  541
  567
  594
  623
  653
  685
  719
  754
  791
  830
  870
  913

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  179
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,524
  1,403
  1,464
  1,529
  1,598
  1,670
  1,747
  1,828
  1,913
  2,003
  2,098
  2,197
  2,302
  2,413
  2,529
  2,652
  2,781
  2,916
  3,058
  3,208
  3,366
  3,531
  3,705
  3,887
  4,079
  4,281
  4,493
  4,716
  4,949
  5,195
  5,453
Adjusted assets (=assets-cash), $m
  1,345
  1,403
  1,464
  1,529
  1,598
  1,670
  1,747
  1,828
  1,913
  2,003
  2,098
  2,197
  2,302
  2,413
  2,529
  2,652
  2,781
  2,916
  3,058
  3,208
  3,366
  3,531
  3,705
  3,887
  4,079
  4,281
  4,493
  4,716
  4,949
  5,195
  5,453
Revenue / Adjusted assets
  2.214
  2.214
  2.214
  2.214
  2.213
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.215
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
  2.214
Average production assets, $m
  722
  752
  785
  819
  856
  895
  936
  979
  1,025
  1,073
  1,124
  1,177
  1,234
  1,293
  1,355
  1,421
  1,490
  1,562
  1,639
  1,719
  1,803
  1,892
  1,985
  2,083
  2,186
  2,294
  2,407
  2,527
  2,652
  2,783
  2,922
Working capital, $m
  418
  248
  259
  271
  283
  296
  309
  324
  339
  355
  372
  389
  408
  427
  448
  470
  493
  516
  542
  568
  596
  625
  656
  689
  723
  758
  796
  835
  877
  920
  966
Total debt, $m
  0
  13
  27
  42
  58
  75
  93
  112
  132
  153
  175
  198
  222
  248
  275
  304
  334
  365
  399
  433
  470
  509
  549
  592
  636
  683
  733
  785
  839
  896
  957
Total liabilities, $m
  314
  327
  341
  356
  372
  389
  407
  426
  446
  467
  489
  512
  536
  562
  589
  618
  648
  679
  713
  747
  784
  823
  863
  906
  950
  997
  1,047
  1,099
  1,153
  1,210
  1,271
Total equity, $m
  1,210
  1,076
  1,123
  1,173
  1,226
  1,281
  1,340
  1,402
  1,467
  1,536
  1,609
  1,685
  1,766
  1,851
  1,940
  2,034
  2,133
  2,237
  2,346
  2,461
  2,581
  2,708
  2,842
  2,982
  3,129
  3,284
  3,446
  3,617
  3,796
  3,985
  4,183
Total liabilities and equity, $m
  1,524
  1,403
  1,464
  1,529
  1,598
  1,670
  1,747
  1,828
  1,913
  2,003
  2,098
  2,197
  2,302
  2,413
  2,529
  2,652
  2,781
  2,916
  3,059
  3,208
  3,365
  3,531
  3,705
  3,888
  4,079
  4,281
  4,493
  4,716
  4,949
  5,195
  5,454
Debt-to-equity ratio
  0.000
  0.010
  0.020
  0.040
  0.050
  0.060
  0.070
  0.080
  0.090
  0.100
  0.110
  0.120
  0.130
  0.130
  0.140
  0.150
  0.160
  0.160
  0.170
  0.180
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.220
  0.220
  0.220
  0.230
Adjusted equity ratio
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767
  0.767

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  200
  238
  248
  259
  271
  283
  295
  309
  323
  338
  354
  373
  390
  409
  428
  448
  470
  492
  516
  541
  567
  594
  623
  653
  685
  719
  754
  791
  830
  870
  913
Depreciation, amort., depletion, $m
  41
  44
  46
  48
  50
  52
  54
  57
  59
  62
  64
  64
  67
  70
  73
  77
  81
  84
  89
  93
  97
  102
  107
  113
  118
  124
  130
  137
  143
  150
  158
Funds from operations, $m
  189
  282
  294
  307
  320
  335
  350
  365
  382
  399
  418
  436
  457
  478
  501
  525
  550
  576
  604
  633
  664
  696
  730
  766
  803
  843
  884
  927
  973
  1,021
  1,071
Change in working capital, $m
  -23
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  27
  28
  29
  31
  32
  34
  36
  38
  39
  41
  44
  46
Cash from operations, $m
  212
  272
  284
  296
  308
  322
  336
  351
  367
  384
  401
  419
  438
  459
  480
  503
  527
  552
  579
  607
  636
  667
  699
  734
  769
  807
  846
  888
  931
  977
  1,025
Maintenance CAPEX, $m
  0
  -39
  -41
  -42
  -44
  -46
  -48
  -51
  -53
  -55
  -58
  -61
  -64
  -67
  -70
  -73
  -77
  -81
  -84
  -89
  -93
  -97
  -102
  -107
  -113
  -118
  -124
  -130
  -137
  -143
  -150
New CAPEX, $m
  -38
  -30
  -33
  -35
  -37
  -39
  -41
  -43
  -46
  -48
  -51
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -108
  -114
  -119
  -125
  -132
  -138
Cash from investing activities, $m
  -19
  -69
  -74
  -77
  -81
  -85
  -89
  -94
  -99
  -103
  -109
  -114
  -120
  -126
  -132
  -139
  -146
  -154
  -160
  -169
  -177
  -186
  -195
  -205
  -216
  -226
  -238
  -249
  -262
  -275
  -288
Free cash flow, $m
  193
  203
  210
  218
  227
  237
  247
  257
  268
  280
  292
  305
  318
  333
  348
  364
  381
  399
  418
  438
  459
  481
  504
  528
  554
  581
  609
  638
  670
  702
  737
Issuance/(repayment) of debt, $m
  0
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
Issuance/(repurchase) of shares, $m
  -25
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -25
  13
  14
  15
  16
  17
  18
  19
  20
  21
  22
  23
  24
  26
  27
  29
  30
  32
  33
  35
  37
  39
  41
  43
  45
  47
  49
  52
  54
  57
  60
Total cash flow (excl. dividends), $m
  168
  216
  224
  233
  243
  253
  264
  276
  288
  301
  314
  328
  343
  359
  375
  393
  411
  431
  451
  473
  496
  520
  545
  571
  599
  628
  658
  690
  724
  760
  797
Retained Cash Flow (-), $m
  -90
  -45
  -47
  -50
  -53
  -56
  -59
  -62
  -65
  -69
  -73
  -77
  -81
  -85
  -89
  -94
  -99
  -104
  -109
  -115
  -121
  -127
  -133
  -140
  -147
  -155
  -163
  -171
  -179
  -188
  -198
Prev. year cash balance distribution, $m
 
  179
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  350
  177
  184
  191
  198
  206
  214
  223
  232
  242
  251
  262
  274
  286
  299
  313
  327
  342
  358
  375
  393
  411
  431
  451
  473
  496
  520
  545
  571
  599
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  335
  162
  160
  157
  153
  149
  144
  139
  133
  127
  119
  112
  104
  96
  88
  79
  71
  63
  55
  48
  41
  34
  28
  23
  18
  14
  11
  8
  6
  5
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

The Jean Coutu Group (PJC) Inc. is a Canada-based company, which is engaged in franchising pharmacy chains. The Company operates through two segments: franchising and generic drugs. Within the franchising segment, the Company carries on the franchising activity under the banners of PJC Jean Coutu, PJC Clinique, PJC Jean Coutu Sante and PJC Jean Coutu Sante Beaute; operates approximately two distribution centers, and coordinates various other services for its franchisees. In the generic drugs segment, the Company owns Pro Doc Ltd, a Canadian manufacturer of generic drugs whose revenues come from the sale of generic drugs to wholesalers and pharmacists. The Company has approximately 420 PJC franchised stores in Quebec, Ontario and New Brunswick. The Company's services to its franchisees include centralized purchasing, distribution, marketing, training, human resources, management, operational consulting and information systems, as well as a private label program.

FINANCIAL RATIOS  of  Jean Coutu Group (PJC) Inc. (The) Class (PJC-A)

Valuation Ratios
P/E Ratio 20
Price to Sales 1.3
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 18.9
Price to Free Cash Flow 23
Growth Rates
Sales Growth Rate 4.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -66.7%
Cap. Spend. - 3 Yr. Gr. Rate -5.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 13.8%
Ret/ On Assets - 3 Yr. Avg. 15.6%
Return On Total Capital 17.2%
Ret/ On T. Cap. - 3 Yr. Avg. 19.8%
Return On Equity 17.2%
Return On Equity - 3 Yr. Avg. 19.8%
Asset Turnover 2.1
Profitability Ratios
Gross Margin 20.7%
Gross Margin - 3 Yr. Avg. 21.4%
EBITDA Margin 10.5%
EBITDA Margin - 3 Yr. Avg. 11.3%
Operating Margin 9.1%
Oper. Margin - 3 Yr. Avg. 10.1%
Pre-Tax Margin 9.2%
Pre-Tax Margin - 3 Yr. Avg. 10.1%
Net Profit Margin 6.7%
Net Profit Margin - 3 Yr. Avg. 7.3%
Effective Tax Rate 26.7%
Eff/ Tax Rate - 3 Yr. Avg. 27.5%
Payout Ratio 44.5%

PJC-A stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PJC-A stock intrinsic value calculation we used $2978 million for the last fiscal year's total revenue generated by Jean Coutu Group (PJC) Inc. (The) Class . The default revenue input number comes from 2017 income statement of Jean Coutu Group (PJC) Inc. (The) Class . You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PJC-A stock valuation model: a) initial revenue growth rate of 4.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for PJC-A is calculated based on our internal credit rating of Jean Coutu Group (PJC) Inc. (The) Class , is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Jean Coutu Group (PJC) Inc. (The) Class .
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PJC-A stock the variable cost ratio is equal to 89.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PJC-A stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Jean Coutu Group (PJC) Inc. (The) Class .

Corporate tax rate of 27% is the nominal tax rate for Jean Coutu Group (PJC) Inc. (The) Class . In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PJC-A stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PJC-A are equal to 24.2%.

Life of production assets of 18.5 years is the average useful life of capital assets used in Jean Coutu Group (PJC) Inc. (The) Class operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PJC-A is equal to 8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1210 million for Jean Coutu Group (PJC) Inc. (The) Class - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 183.692 million for Jean Coutu Group (PJC) Inc. (The) Class is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Jean Coutu Group (PJC) Inc. (The) Class at the current share price and the inputted number of shares is $4.0 billion.

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Financial statements of PJC-A
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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